In September 2022, the S&P 500 made an uncommon gain of 2%, which is unusual for this month. Historically, September has been the worst month for the index since 2000. Major events, like the financial crisis in 2009 and the return of policymakers from summer breaks, often cause market disruptions. Additionally, many investors like to secure profits before the year’s end.

September Market Trends

Over the past 20 years, several trends have emerged each September. It is the second worst month for Germany’s DAX, after August, but leads to a strong three months ahead. Natural gas often starts a solid three-month rise in September, although the prices usually reflect this expectation. On the other hand, West Texas Intermediate crude oil typically enters a weak three-month phase starting in September. The MSCI world index also suffers in September, with silver and gold prices dropping—September is particularly hard on gold. Despite this historical trend, current market conditions hint at possible movements in gold prices. Given September’s historical weakness for riskier assets, caution is advised as we begin the month. The S&P 500 has recently retreated from its record high of 5,800 set in late August. With policymakers back from vacation, the chances of disruptive news rise. We might consider buying put options for downside protection or selling out-of-the-money call spreads to benefit from a potential slowdown. This trend isn’t limited to the U.S. The MSCI world index also tends to have a tough September. Recent manufacturing PMI data from Germany is at 48.5, showing contraction, which adds pressure on the DAX. While German stocks usually rebound in the fourth quarter, waiting for a dip this month could provide better entry points. Gold appeared to be breaking out last week but couldn’t maintain the crucial $2,450 level as the US Dollar Index strengthened. September is seasonally the weakest month for both gold and silver, making this rejection a major warning sign. We could consider shorting gold futures or selling calls, anticipating a pullback toward the $2,380 support level.

Natural Gas and Oil Projections

WTI crude oil is also entering a period of seasonal weakness lasting about three months. Last week’s EIA report revealed an unexpected inventory increase of 1.8 million barrels, indicating that supply is exceeding demand as the summer driving season ends. In past years, oil prices dropped significantly in the fourth quarter, and we might see a similar trend starting now. In contrast, we’re approaching a strong three-month seasonal period for natural gas. Early weather forecasts predict a cooler-than-average start to October, and U.S. storage levels are currently 3% below the five-year average. This situation suggests we should look at building long positions using call options or futures contracts to take advantage of potential price spikes as heating demand increases. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now